As the tax filing deadline approaches on Monday, April 17, 2023, it is important to understand the deadlines for retirement plan contributions. Depending on your retirement plan type, the contribution deadline may differ.
Contributions Due On or Before April 17, 2023
Traditional and Roth IRA contributions for the 2022 tax year must be made by the tax filing deadline of April 17 this year.
Traditional IRA contributions, whether tax-deductible or not, are reported on your Individual income tax return, so you should not file your tax return until after you have made the IRA contribution. The tax-deductible portion of the IRA contribution is reported on Page 1 of Form 1040. Any portion of the contribution that is not tax-deductible is reported on Form 8606.
Roth IRA contributions are not reported on your individual income tax return but are reported to the IRS by the brokerage firm where your Roth IRA account is held. You can confirm this was done by reviewing Form 5498, mailed to you in May each year.
Contributions That Can be Made On or After April 17, 2023
Individual 401(k) Plans
An individual 401(k) plan is a retirement plan for businesses without employees. Like a 401(k) plan with employees, the contributions consist of salary deferral and employer contributions. The deadline for making the salary deferral contribution is typically December 31 of the plan year unless all the following apply:
- You make them by the due date of your tax return for the previous year (plus extensions)
- The plan was established by the end of the previous year
- The plan treats the contributions as though it had received them on the last day of the previous year
- You do either of the following:
- You specify in writing to the plan administrator or trustee that the contributions apply to the previous year
- You deduct the contributions on your tax return for the previous year. A partnership shows contributions for partners on Form 1065.
The deadline for making the employer contribution is the due date of the previous year’s tax return (plus extensions).
A SEP IRA is a Simplified Employee Pension Plan. The employer makes contributions to a SEP IRA. The contribution deadline for a SEP IRA is the tax filing deadline, including extensions. Contributions are reported on the employer’s tax return, so the SEP IRA should ideally be funded before filing the business tax returns.
Regardless of the type of retirement plan, it is not wise to wait until the last day to contribute. The deadlines discussed above do not allow for any exceptions. The money must be received and credited to your account by the due date; therefore, mailing a distribution check a few days before the deadline may not ensure a timely contribution. Besides the mail, other methods can be used for last-minute contributions, such as wiring funds to the retirement plan account or transferring funds from another brokerage account at the same custodian.
If you have questions regarding this topic, do not hesitate to contact your financial planner.